The president's Clear Skies and Global Climate Change initiative throws down the gauntlet to Senate Democrats who want to stiffen existing Clean Air Act (CAA) requirements on electric power producers. The outcome of the battle could have significant impacts on the cost and availability of power.

Representing the views of investor-owned utilities, President Thomas Kuhn of the Edison Electric Institute says Bush's multi-emissions approach could result of deeper pollution cuts than existing regulations mandate, lower regulatory compliance costs, and could reduce the court logjam. The National Association of Manufacturers (NAM) praises the climate change initiative, but says it wants to study the possible impact in forcing electricity generators to switch from abundant coal to natural gas. "This could drastically raise the price of both electricity and natural gas," says NAM President Jerry Jasinowski.

Bush's plan would dismantle the CAA's plant-by-plant regulation of air pollution that has led to delays and court battles. He proposes replacing the CAA's "new source review" (NSR), which requires a permit with approved pollution reduction technology, before construction of new plants and expansion of old ones. Bush would tailor the program for SO₂, NO and mercury pollutants with market-based incentives that have been used for SO₂ under the CAA, giving utilities more time and flexibility to develop reduction strategies.

The Bush global climate proposal proposes a voluntary program for reduction of carbon emissions that contribute to the greenhouse gas (GHG) effect on global warming. His target for carbon reduction is also much less drastic than the target called for by the Kyoto world treaty, cutting it back to 7% below the emission levels of 1990.

If the Bush plan is enacted, costs of reducing one targeted pollutant, sulfur dioxide, obviously will increase, according to A. Denny Ellerman, executive director of the MIT Center for Energy and Environmental Policy Research. Given the experience with SO₂ tradable pollution allowances under Title IV of the CAA, Ellerman predicts most of the increased costs will fall in years closer to the proposed deadlines (2010 and 2018). Even with required increased investments in pollution controls, however, these costs historically have represented only 5-10% of the total cost of producing electricity, Ellerman ex-plains. Cleaning up pollutants under a cap and trade system (the Bush plan) is still cheaper and quicker than the old command-and-control regulatory system, he says. That system has not been effective and has been enormously costly, he says, adding: "The president's proposal really amounts to a reform of clean air regulation in the U.S."